The award issued by Branch 36 of the Tehran General (Civil) Court, in the course of adjudicating a claim for recovery of Arsh, default damages for delay in payment, and litigation costs, incidentally addresses the nature of Arsh and certain rules and effects arising from its determination. The court, reasoning that Arsh itself constitutes a form of damages, declined to award damages for delay in payment of Arsh. On the other hand, the court rejected as unfounded the defenses raised by the defendant’s counsel regarding the extinguishment of Arsh as a consequence of the waiver of all options, and, relying on the opinion of a three-member expert panel, ordered the defendant to pay Arsh resulting from the defect. The present study examines, through a descriptive–analytical approach, the legal nature of Arsh and the issue of its extinguishment following the waiver of the option of defect. The characterization of Arsh as either compensation for loss or as performance of an obligation arising from Exchange Liability has a decisive impact on its legal rules and effects. If Arsh is regarded as damages, an award of default damages for delay in payment would face limitations such as the requirement of prior ascertainment of the amount of damages and the prohibition on awarding damages upon damages. Conversely, if the payment of Arsh is viewed as the performance of an obligation grounded in Exchange Liability, its nature would not be compensatory damages, but rather a mechanism for restoring equilibrium and balance between the reciprocal contractual obligations. In this latter case, once Arsh is claimed by the entitled party, reliance on the doctrine of warranty of possession, instead of the rules of destruction (itlāf) or causation (tasbīb), may preclude the occurrence of loss arising from delay in payment or non-performance of Arsh.